Julie has just retired. Her companys retirement program has two options as to how retirement benefits can be received. Under the first option, Julie would receive a lump sum of $135,000 immediately as her full retirement benefit. Under the second option, she would receive $18,000 each year for 12 years plus a lump-sum payment of $54,000 at the end of the 12-year period.

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required:

1-a. Calculate the present value for the following assuming that the money can be invested at 11%.

1-b. If she can invest money at 11%, which option would you recommend that she accept?